Civil Law Secured Transactions Simple Loan Relation between bank and depositor

L.C. Diaz and Company (LC Diaz), an accounting firm, has a savings account with
Consolidated Bank and Trust Corporation (now called Solidbank Corporation).
On August 14, 1991, the firms messenger, a certain Ismael Calapre, deposited an amount
with the bank but due to a long line and the fact that he still needs to deposit a certain
amount in another bank, the messenger left the firms passbook with a teller of Solidbank.
But when the messenger returned, the passbook is already missing. Apparently, the teller
returned the passbook to someone else.
On August 15, 1991, LC Diaz made a formal request ordering Solidbank not to honor any
transaction concerning their account with them until the firm is able to acquire a new
passbook. It appears however that in the afternoon of August 14, 1991, the amount of
P300,000.00 was already withdrawn from the firms account.
LC Diaz demanded Solidbank to refund the said amount which the bank refused. LC Diaz
then sued Solidbank.
In its defense, Solidbank contends that under their banking rules, they are authorized to
honor withdrawals if presented with the passbook; that when the P300k was withdrawn, the
passbook was presented. Further, the withdrawer presented a withdrawal slip which bore
the signatures of the representatives of LC Diaz.
The RTC ruled in favor of Solidbank. It found LC Diaz to be negligent in handling its
passbook. The loss of the P300k was not the result of Solidbanks negligence.
On appeal, the Court of Appeals reversed the decision of the RTC. The CA used the rules
on quasi-delict (Article 2176 of the Civil Code).
ISSUE: Whether or not the relations between Solidbank and LC Diaz, the depositor, is
governed by quasi-delict in determining the liability of Solidbank.
HELD: No. Solidbank is liable for the loss of the P300k but its liability is grounded on culpa
contractual.
The contract between the bank and its depositor is governed by the provisions of the Civil
Code on simple loan (Article 1980, Civil Code). There is a debtor-creditor relationship
between the bank and its depositor. The bank is the debtor and the depositor is the

creditor. The depositor lends the bank money and the bank agrees to pay the depositor on
demand. The savings deposit agreement between the bank and the depositor is the
contract that determines the rights and obligations of the parties.
Under their contract, it is the duty of LC Diaz to secure its passbook. However, this duty is
also applicable to Solidbank when it gains possession of said passbook which it did when
the messenger left it to the banks possession through the banks teller. The act of the teller
returning the passbook to someone else other than Calapre, the firms authorized
messenger, is a clear breach of contract. Such negligence binds the bank under the
principle of respondeat superior or command responsibility.
No contract of trust between bank and depositor
The Supreme Court emphasized that the contractual relation between the bank and the
depositor is that of a simple loan. This is despite the wording of Section 2 of Republic Act
8791 (The General Banking Law of 2000) which states that the State recognizes the
fiduciary nature of banking that requires high standards of integrity and performance. That
the bank is under obligation to treat the accounts of its depositors with meticulous care,
always having in mind the fiduciary nature of their relationship.
This fiduciary relationship means that the banks obligation to observe high standards of
integrity and performance is deemed written into every deposit agreement between a bank
and its depositor. The fiduciary nature of banking requires banks to assume a degree of
diligence higher than that of a good father of a family.
However, the fiduciary nature of a bank-depositor relationship does not convert the contract
between the bank and its depositors from a simple loan to a trust agreement, whether
express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan,
and not a breach of trust.
In short, the General Banking Act simply imposes on the bank a higher standard of
integrity and performance in complying with its obligations under the contract of simple loan,
beyond those required of non-bank debtors under a similar contract of simple loan. The
General Banking Law in no way modified Article 1980 of the Civil Code.

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BIGNAY EX-IM PHILIPPINES, INC., Petitioner,

vs.
UNION BANK OF THE PHILIPPINES, Respondent.
G.R. No. 171590

February 12, 2014

PONENTE: Del Castillo, J.

TOPIC: Negligence
FACTS:
In 1988, Rosario filed against Alfonso and Union Bank, Civil Case No. Q-52702
for annulment of the 1984 mortgage, claiming that Alfonso mortgaged the property
without her consent, and for reconveyance.
In a September 6, 1989 Letter-Proposal, Bignay Ex-Im Philippines, Inc.
(Bignay), through its President, Milagros Ong Siy (Siy), offered to purchase the
property.
On December 20, 1989, a Deed of Absolute Sale6 was executed by and between
Union Bank and Bignay whereby the property was conveyed to Bignay for P4 million.
The deed of sale was executed by the parties through Bignays Siy and Union Banks
Senior Vice President Anthony Robles (Robles). One of the terms of the deed of sale is
quoted below:
Section 1. The VENDEE hereby recognizes that the Parcel/s of Land with
improvements thereon is acquired through foreclosure proceedings and agrees to buy
the Parcel/s of Land with improvements thereon in its present state and condition. The
VENDOR therefore does not make any x x x representations or warranty with respect to
the Parcel/s of Land but that it will defend its title to the Parcel/s of Land with
improvements thereon against the claims of any person whomsoever.
On December 12, 1991, a Decision8was rendered in Civil Case No. Q-52702 in
favor of Alfonso. Union Bank appealed the above Decision with the CA. It likewise
sought a new trial of the case, which the trial court denied. The CA appeal was dismissed

for failure to file appellants brief; the ensuing Petition for Review with this Court was
similarly denied for late filing and payment of legal fees.
Union Bank next filed with the CA an action to annul the trial courts December
12, 1991 judgment. In a September 9, 1993 Resolution, however, the CA again dismissed
the Petition for failure to comply with Supreme Court Circular No. 28-91. The banks
Motion for Reconsideration was once more denied.
This time, Bignay filed a Petition for annulment of the December 12, 1991
Decision, docketed as CA-G.R. SP No. 33901. In a July 15, 1994 Decision, the CA
dismissed the Petition. Bignays resultant Petition for Certiorari with this Court suffered
the same fate.
Meanwhile, as a result of the December 12, 1991 Decision in Civil Case No. Q52702, Bignay was evicted from the property; by then, it had demolished the existing
structure on the lot and begun construction of a new building.
ISSUE:
Whether or not Union Bank was grossly negligent in this case.
HELD:
YES. The Court held that the gross negligence of the seller in defending its title
to the property subject matter of the sale thereby contravening the express
undertaking under the deed of sale to protect its title against the claims of third persons
resulting in the buyers eviction from the property, amounts to bad faith, and the buyer
is entitled to the remedies afforded under Article 1555 of the Civil Code.
The record reveals that Union Bank was grossly negligent in the handling and
prosecution of Civil Case No. Q-52702. Its appeal of the December 12, 1991 Decision in
said case was dismissed by the CA for failure to file the required appellants brief. Next,
the ensuing Petition for Review on Certiorari filed with this Court was likewise denied
due to late filing and payment of legal fees. Finally, the bank sought the annulment of
the December 12, 1991 judgment, yet again, the CA dismissed the petition for its failure
to comply with Supreme Court Circular No. 28-91. As a result, the December 12, 1991
Decision became final and executory, and Bignay was evicted from the property. Such

negligence in the handling of the case is far from coincidental; it is decidedly glaring,
and amounts to bad faith. Negligence may be occasionally so gross as to amount to
malice [or bad faith]. Indeed, in culpa contractual or breach of contract, gross
negligence of a party amounting to bad faith is a ground for the recovery of damages by
the injured party.

--

heirs of Catungal v. angel rodriguez [2011]

6:55 AM digests, heirs of Catungal v. angel rodriguez, interpretation of contracts No comments
doctrine

NCC 1374: the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that
sense which may result from all of them taken jointly."

If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual."

contested provision
5. That the VENDEE has the option to rescind the sale. In the event the VENDEE exercises his option to rescind the
herein Conditional Deed of Sale, the VENDEE shall notify the VENDOR by way of a written notice relinquishing his
rights over the property. The VENDEE shall then be reimbursed by the VENDOR the sum of P500K representing the
DP, interest free, payable but contingent upon the event that the VENDOR shall have been able to sell the property
to another party.

facts

Agapita T. Catungal owned Lot A (65,246 sq m) covered by OCT 105 at Talamban, Cebu City. The said property was
allegedly the exclusive paraphernal property of Agapita.

Agapita, with the consent of her husband Jose, entered into a Contract to Sell with Rodriguez. Subsequently, the
Contract to Sell was purportedly "upgraded" into a Conditional Deed of Sale. Both deeds were annotated on the
title.

The parties entered into is a Conditional Deed of Sale, whereby the spouses Catungal agreed to sell
and Rodriguez agreed to buy Lot A conditioned on the payment of a certain price but the payment of
the purchase price was additionally made contingent on the successful negotiation of a road right of
way.

Spouses Catungal requested an advance of P5M on the purchase price. Rodriquez allegedly refused on the ground
that the amount was substantial and was not due under the terms of their agreement. Shortly after his refusal

to pay the advance, he purportedly learned that the Catungals were offering the property for sale to
third parties.

Jose Catungal demanded that the former make up his mind about buying the land or exercising his "option" to buy
because the spouses Catungal allegedly received other offers.

Rodriguez registered his objections to the unwarranted demands in view of the terms of the Conditional Deed of
Sale which allowed him sufficient time to negotiate a road right of way and granted him, the vendee, the exclusive
right to rescind the contract.

Rodriguez purportedly received a letter dated Nov 9, 1990 15 from Atty. Catungal, stating that the mcontract had
been cancelled and terminated.

procedural history

Catungals filed a MTD on the ground of improper venue. The subject property was located in Cebu City and thus,
the complaint should have been filed in Cebu City, not Lapu-lapu City.

Rodriguez opposed the MTD on the ground that his action was a personal action as its subject was breach of a
contract, the Conditional Deed of Sale, and not title to, or possession of real property.

Complaint involved a personal action, being merely for damages with a prayer for injunction.

Catungals alleged that they had the right to rescind the contract in view of

o (1) Rodriguezs failure to negotiate the road right of way despite the lapse of several months since the signing of the
contract, and
o (2) his refusal to pay the additional amount of P5M asked by the Catungals, which to them indicated his lack of funds
to purchase the property.

Catungals also allegedly misrepresented that the road right of way will only traverse two lots owned by Anatolia
Tudtud and her daughter Sally who were their relatives and who had already agreed to sell a portion of the said lots
for the road right of way at a price of P550.00 per sq m.

However, because of the Catungals acts of offering the property to other buyers who offered to buy the road lots
forP2,500.00 per sq m, the adjacent lot owners were no longer willing to sell the road lots to Rodriguez atP550.00
per sq m but were asking for a price of P3,500.00 per sq m.

Catungals filed a Petition for Certiorari and Prohibition37 with the CA, questioning the denial of their MTD and the
order of default.

TC ruled in favor of Rodriguez, finding that:

o (a) under the contract it was (Rodriguez) that had the option to rescind the sale;
o (b) Rodriguezs obligation to pay the balance of the purchase price arises only upon successful negotiation of the
road right of way;
o (c) he proved his diligent efforts to negotiate the road right of way;
o (d) the spouses Catungal were guilty of misrepresentation which defeated Rodriguezs efforts to acquire the road
right of way; and

CA affirming the TCs Decision.

Counsel for the Catungals, Atty. Borromeo, argued for the first time that pars 1(b) and 5 of the Conditional Deed of
Sale, whether taken separately or jointly, violated the principle of mutuality of contracts under Art 1308 of
the Civil Code and thus, said contract was void ab initio.

issue #1: Are Peaches allowed to raise their theory of nullity of the Conditional Deed of Sale for the first time on
appeal?

This is a situation where a party completely changes his theory of the case on appeal and abandons his previous
assignment of errors in his brief, which plainly should not be allowed as anathema to due process.

PH National Construction Corp v. CA: when a party adopts a certain theory in the TC, he will not be permitted to
change his theory on appeal, for to permit him to do so would not only be unfair to the other party but it would also
be offensive to the basic rules of fair play, justice and due process."

issue #2. Do pars 1(b) and 5 of the Conditional Deed of Sale violate the principle of mutuality of contracts under Art
1308 of the Civil Code?
right of way negotiation was not a potestative condition

The undertaking required of private respondent does not constitute a "potestative condition dependent solely on
his will" that might be void in accordance with NCC 1182 but a "mixed" condition "dependent not on the will of the
vendor alone but also of third persons like the squatters and government agencies and personnel concerned."

Romero v. CA: Private respondent's failure "to remove the squatters from the property" within the stipulated period
gives Peaches the right to either refuse to proceed with the agreement or waive that condition in consonance with
NCC 1545. This option clearly belongs to Peaches and not to private respondent.

catungals should have filed an action to fix the period

What the Catungals should have done was to first file an action in court to fix the period within which Rodriguez
should accomplish the successful negotiation of the road right of way. Catungals demand for Rodriguez to make an
additional payment of P5M was premature and Rodriguezs failure to accede to such demand did not justify the
rescission of the contract.

Rodriguezs option to rescind the contract is not absolute

Peachess insist that the Court examine the first sentence of par 5 alone gives the respondent right to rescind
arbitrarily. Therefore, the contract should be considered as void.

NCC 1374: the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that
sense which may result from all of them taken jointly."

If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual."

Under the Rules of Court it is prescribed that "[i]n the construction of an instrument where there are several
provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all" and "for the
proper construction of an instrument, the circumstances under which it was made, including the situation of the
subject thereof and of the parties to it, may be shown, so that the judge may be placed in the position of those
whose language he is to interpret."

Rodriguezs option to rescind the contract is not absolute as it is subject to the requirement that there should be
written notice to the vendor and the vendor shall only return Rodriguezs DP of P500K, when the vendor shall have
been able to sell the property to another party.

The intention of the parties for providing subsequently in par 5 that Rodriguez has the option to
rescind the sale is undeniably only limited to the contingency that Rodriguez shall not be able to
secure the road right of way. The reason only the DP was stipulated to be returned is that the vendees option to
rescind can only be exercised in the event that no road right of way is secured and, thus, the vendee has not made
any additional payments, other than his DP.

In the event the negotiation is successful, Rodriguez must pay the balance of the purchase price. In
the event the condition is not fulfilled (or the negotiation fails), Rodriguez has the choice either (a) to
not proceed with the sale and demand return of his DP or (b) considering that the condition was
imposed for his benefit, to waive the condition and still pay the purchase price despite the lack of road
access. This is the most just interpretation of the parties contract that gives effect to all its
provisions.

Where the so-called potestative condition is imposed not on the birth of the obligation but on its fulfillment, only
the condition is avoided, leaving unaffected the obligation itself."

dispositive

Rodriguez is given a period of 30 days from the finality of this decision to negotiate a road right of way.

In the event no road right of way is secured by Rodriquez at the end of said period, the parties shall reassess and
discuss other options as stipulated in par 1(b) of the Conditional Deed of Sale and, for this purpose, they are given a
period of 30 days to agree on a course of action.

Should the discussions of the parties prove futile after the said 30-day period, immediately upon the expiration of
said period for discussion, Rodriguez may

o (a) exercise his option to rescind the contract, subject to the return of his DP, in accordance with the provisions of
pars 1(b) and 5 of the Conditional Deed of Sale or
o (b) waive the road right of way and pay the balance of the deducted purchase price as determined in the RTC
Decision dated May 30, 1992.

Tan Chiong Sian vs. Inchausti (GR 6092, 8 March 1912)

En Banc, Torres (J): 3 concur, 2 dissent
Facts:
On 25 November 1908, Inchausti & Co. received in Manila from the Chinaman, Ong
Bieng Sip, 205bundles, bales or cases of goods to be conveyed by the steamer
Sorsogon to the port of Gubat, Province ofSorsogon, where they were to be
transshipped to another vessel belonging to Inchausti and by the lattertransported
to the pueblo of Catarman, Island of Samar, there to be delivered to the Chinese
shipper withwhom Inchausti made the shipping contract. To this end 3 bills of lading
were executed (38, 39, and 76). Thesteamer Sorsogon, which carried the goods,
arrived at the port of Gubat on 28 November 1908 and as thelorcha Pilar, to which
the merchandise was to be transshipped for its transportation to Catarman, was not

yetthere, the cargo was unloaded and stored in the defendant companys
warehouses at that port. Several dayslater, the lorcha Pilar arrived at Gubat and,
after the cargo it carried had been unloaded, the merchandisebelonging to the
Chinaman, Ong Bieng Sip, together with other goods owned by Inchausti & Co., was
takenaboard to be transported to Catarman. On 5 December 1908, however, before
the Pilar could leave for itsdestination, towed by the launch Texas, there arose a
storm, which, coming from the Pacific, passed overGubat and, as a result of the
strong wind and heavy sea, the lorcha was driven upon the shore and wrecked,and
its cargo, including the Chinese shippers 205 packages of goods, scattered on the
beach. Laborers orworkmen of Inchausti, by its order, then proceeded to gather up
Tan Chiong Sians merchandise and, as it wasimpossible to preserve it after it was
salved from the wreck of the lorcha, it was sold at public auction before anotary for
the sum of P1,693.67.On 11 January 1909, the Chinaman, Tan Chiong Sian or Tan
Chinto, filed a written complaint, which wasamended on 28 January 1909, and again
on 27 October 1909 against Inchausti & Co. alleging that Inchaustineither carried
nor delivered his merchandise to Ong Bieng Sip, in Catarman, but unjustly and
negligentlyfailed to do so, with the result that the said merchandise was almost
totally lost, and thus claimed the value ofthe merchandise which was P20,000, legal
interest thereon from 25 November 1908, and the cost of the suit.After the hearing
of the case and the introduction of testimony by the parties, judgment was
rendered, on 18March 1910, in favor of Tan Chiong Sian or Tan Chinto,
against Inchausti & Co., for the sum of P14,642.63,with interest at the rate of 6%
per annum from 11 January 1909, and for the costs of the trial. Inchausti &
Co.appealed from the judgment.The Supreme Court reversed the judgment
appealed from, and absolved Inchausti & Co., without specialfinding as to costs;
holding that Inchausti is not liable for the loss and damage of the goods shipped on
thelorcha Pilar by the Chinaman, Ong Bieng Sip, inasmuch as such loss and damage
were the result of afortuitous event or force majeure, and there was no negligence
or lack of care and diligence on the part ofInchausti or its agents
1.Article 1601 NCC
Article 1601 of the Civil Code prescribes that Carriers of goods by land or by water
shall be subjectwith regard to the keeping and preservation of the things entrusted
to them, to the same obligations asdetermined for innkeepers by articles 1783 and
1784. The provisions of this article shall be understoodwithout prejudice to what is
prescribed by the Code of Commerce with regard to transportation by sea andland.
2.Article 1602 NCC
Article 1602 of the Civil Code reads Carriers are also liable for the loss of and
damage to the thingswhich they receive, unless they prove that the loss or damage
arose from a fortuitous event or force majeure.
3.Articles 1783 NCC
Article 1783 of the Civil Code provides that the depositum of goods made by
travelers in inns orhostelries shall also be considered a necessary one. The keepers
of inns and hostelries are liable for them assuch bailees, provided that notice

thereof may have been given to them or to their employees, and that thetravelers
on their part take the precautions which said innkeepers or their substitutes may
have advised themconcerning the care and vigilance of said goods.
4.Article 1784 NCC
Article 1784 of the Civil Code provides that the liability referred to in the preceding
article shallinclude damages to the goods of the travelers caused by servants or
employees of the keepers of inns orhostelries as well as by strangers, but not those
arising from robbery or which may be caused by any othercase of force majeure.
5.Article 361, Code of Commerce
Article 361 of the Code of Commerce provides that Merchandise shall be
transported at the risk andventure of the shipper, unless the contrary was expressly
stipulated. Therefore, all damages and impairmentsuffered by the goods in
transportation, by reason of accident, force majeure, or by virtue of the nature
ordefect of the articles, shall be for the account and risk of the shipper. The proof of
these accidents isincumbent on the carrier.
6.Article 362, Code of Commerce
Article 362 of the Code of Commerce provides that the carrier, however, shall be
liable for the lossesand damages arising from the causes mentioned in the
foregoing article if it is proved that they occurred onaccount of his negligence or
because he did not take the precautions usually adopted by careful persons,unless
the shipper committed fraud in the bill of lading, stating that the goods were of a
class or qualitydifferent from what they really were. If, notwithstanding the
precaution referred to in this article, the goodstransported run the risk of being lost
on account of the nature or by reason of an unavoidable accident,without there
being time for the owners of the same to dispose thereof, the carrier shall proceed
to their saleplacing them for this purpose at the disposal of the Judicial authority or
of the officials determined by specialprovisions.
7.Article 363, Code of Commerce
Article 363 of the Code of Commerce provides that with the exception of the cases
prescribed in thesecond paragraph of article 361, the carrier shall be obliged to
deliver the goods transported in the samecondition in which, according to the bill of
lading, they were at the time of their receipt, without anydetriment or impairment,
and should he not do so, he shall be obliged to pay the value of the goods
notdelivered at the point where they should have been and at the time the delivery
should have taken place. Ifpart of the goods transported should be delivered the
consignee may refuse to receive them, when he provesthat he can not make
use thereof without the others.